
Brent Declines Slightly While U.S. Crude Rises Amid Record Pump Prices
By Barani Krishnan
Crude oil prices experienced a mixed week as trading closed on Friday. The global benchmark Brent saw a slight weekly loss due to Europe’s reluctance to implement a ban on Russian oil, while U.S. crude prices increased on the back of strong summer demand and supply constraints, resulting in record-high pump prices.
In Friday’s trading, both Brent and West Texas Intermediate (WTI) crude benchmarks rose approximately 4%, recovering from a nearly 10% drop earlier in the week caused by concerns that the U.S. economy might be headed for a recession due to aggressive interest rate hikes intended to combat the highest levels of inflation in 40 years.
Brent crude finished at $111.55 per barrel, up $4.10 or 3.8% on the day, although it posted a 0.7% loss for the week. In contrast, WTI settled at $110.49, an increase of $4.36 or 4.1%, reflecting a weekly rise of 0.7%.
John Kilduff, a partner at an energy hedge fund, referred to the situation as "a story of two oils." He noted that the hesitance for an EU embargo on Russian oil, particularly from Hungary, restricts Brent’s potential, while WTI benefits from a tight refining market that has driven U.S. gasoline prices to unprecedented levels.
Some EU members indicated that discussions on banning Russian oil might need to be postponed to focus on other sanctions against Moscow, especially if immediate consensus could not be reached with Budapest on the embargo.
Saudi Arabia’s Energy Minister, Abdulaziz bin Salman, sought to clarify that OPEC+ should not be blamed for the record-high gasoline prices in the U.S., emphasizing that it is rather a lack of U.S. refining capacity causing the current crisis. He stated that OPEC+ has successfully lifted crude prices from their lows through modest production increases that fall short of market requirements.
According to Abdulaziz, the current bottleneck in U.S. fuel supply is predominantly linked to refining capabilities. He had previously warned that this situation would arise due to the closure of many refineries in recent years, leading to a global energy capacity shortage.
Currently, fuel prices have reached new heights, with gasoline exceeding $4.50 per gallon at various U.S. locations and diesel prices surpassing $6.
The International Energy Agency has warned that the rising fuel prices, coupled with slowing economic growth, are likely to hinder the demand recovery for the rest of the year and into 2023. Economists also caution that the U.S. economy, which was finally recovering from the impact of the pandemic, could face another recession due to the combination of surging fuel costs and Federal Reserve rate hikes.